Compliance February 20, 2008

Supreme Court to Decide Issue of Ex-spouse Waiver of Benefits

February 20, 2008 (PLANSPONSOR.com) - The U.S. Supreme Court has agreed to hear a case in which the 5th U.S. Circuit Court of Appeals found that a qualified domestic relations order (QDRO) as provided for in the Employee Retirement Income Security Act (ERISA) is the only valid way a divorced spouse can waive his or her right to the ex-spouse's pension benefits.
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Reversing a lower court decision that William and Liv Kennedy’s divorce decree was a valid waiver of Liv’s right to William’s retirement plan benefits under federal common law, the 5 th Circuit said that approach “is in tension, to say the least, with the detailed, careful, and comprehensive QDRO scheme created by ERISA.” The appellate court said ERISA’s QDRO provisions provide the only exception to its anti-alienation provisions in the marital-dissolution context.

William Patrick Kennedy worked for E.I. DuPont De Nemours & Company and participated in the DuPont Savings and Investment Plan (SIP). Pursuant to ERISA, the SIP provided that “no assignment of the rights or interests of account holders under this Plan will be permitted or recognized” Liv Kennedy was William’s spouse and was his designated beneficiary under the plan.

Liv and William divorced in 1994, and in the divorce decree Liv Kennedy agreed to be divested of “all right, title, interest, and claim in and to … the proceeds therefrom, and any other rights related to any … retirement plan, pension plan, or like benefit program existing by reason of [William’s] employment”. In 1997, an ERISA QDRO was approved, but it provided benefit-disbursement instructions for some of William’s non-SIP employee-benefit plans. No QDRO for the SIP benefits was ever submitted.

When William died in 2001, his estate requested his SIP benefits, claiming that Liv waived her right to benefits per Texas state law in the divorce decree. DuPont refused the estate’s request and paid benefits to Liv.

The estate filed a lawsuit, and a federal district court awarded summary judgment to the estate, concluding that federal common law applied to determine whether Liv Kennedy’s executing the divorce decree waived her right to the SIP benefits; and, as a matter of law, that decree constituted a valid waiver.

After the 5 th Circuit reversed the district court’s opinion, a request was submitted to the U.S. Supreme Court to decide on the issue.

The 5 th Circuit opinion in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan is here .

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